tv Nightly Business Report PBS March 24, 2010 6:30pm-7:00pm EDT
captioning sponsored by wpbt >> susie: bank of america is taking a new direction when it comes to foreclosure prevention; it's cutting the principal on some troubled loans. >> tom: but it's doing so under pressure. we talk with the attorney general pushing b. of a. to help more homeowners. you're watching "nightly business report" for wednesday, march 24. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program was made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening everyone. welcome relief today for some people who can't make their mortgage payments if it's with bank of america. tom, under pressure from state attorneys general, the bank agreed to forgive as much as 30% of the loan principal. today's announcement comes as part of a settlement with the state of massachusetts. >> tom: susie, lots of strings attached to qualify. for one thing, the relief is only for certain types of mortgages. the homeowners also have to be at least 60 days behind on their payments and significantly underwater on their loans. just 45,000 people are eligible nationwide. >> susie: those loans could be reduced by a combined total of
$3 billion. the plan goes into effect in may. leading the negotiations with bank of america was massachusetts attorney general martha coakley. she joins us now. attorney general coakley, thank so you much for coming on the program. >> good evening. >> susie: let me begin by congratulating you on the deal, about 45,000 people will be helped by this agreement. but my question is, is that enough? we report on our show all the time that there are millions of people who are under water in that they owe more to banks than the value of their home. is this enough? >> well, it is certainly a good start, because we've tried with other attorneys general to push this idea that modifying loans, reducing principal so that you get modifications that actually work to keep people in their homes, this is the first time that people have really been willing to do this. and so countrywide, those who have countrywide mortgages will benefit, but our hope is
that other holders of notes will recognize that this is what really has to happen to make sure we stop the spread of foreclosure and start to turn this economic crisis around. >> susie: that's a good point. do you think that your agreement with bank of america will be a prototype for other lenders and even for the federal government for the treasury to do something similar? >> well, we hope so. because for several years now we've worked on foreclosure rescue schemes, on bringing lawsuits. the attorney general had an agreement with bank of america, with countrywide in the past. but even though the servicers have said they've been willing to modify loans, we've seen somewhat half hearted efforts eve friend the federal pressure. this is an agreement that they will do this, and we believe it's commercially reasonable for them to do it, rather than to have homes foreclosed upon. and we hope that it finally is beginning to dawn that this is what should happen to turn this around, keep them in the home, but also stop the greater threat of foreclosures, make sure we don't have
abandoned property, and keep people back, you know, paying a monthly amount so that we really stop the trend that we've seen that's really under liing the root of a lot of this economic crisis. >> susie: you mentioned about the half hearted efforts. even in the case of this deal with bank of america, what can you do to make sure that they really do modify loans in this way? >> well, i think it's clear that as a result of our investigation and in fact that we were looking for this remedy. we were prepared to bring suit if we weren't able to reach this agreement. and some of the money that comes to the commonwealth are for monitoring and implementation of this agreement. we believe very strongly that this has to happen, it has to happen in a way that actually keeps people in their homes. so we're committed to it. and the fact that it is going have both other servicers as well as other attorney generals general trying to help keep people in their homes.
>> susie: so what's next? what's your next move? what else can you do and other states do to help distressed homeowners who are not part of, who do not have loans with bank of america, but what more can you do to help distressed homeowners? >> well, as we have looked at the range of options, as we have in massachusetts brought a suit against freemont and a suit pending against option one, we are continuing to focus on both holding accountable those who made these kinds of loanss, and i should point out that they're not just sub prime loans here, these were loans that were made in a variety of ways to people who might have had more, they were credit worthy wore both rowers, might have had less risky financial products, and we'll continue to look at those who have made the loans, who are servicing the loans is where the sticking point has been. let's get the servicers together with the holders of the notes to say this is what really should be happening, to continue this push to really stop the spread of
foreclosures. so we're going to continue to stay active with many of the other attorneys general, and i know the federal government through its program in working in conjunction with attorneys general lookings at mortgage fraud, but also looking at ways in which we start making these remedies be real remedys to keep people in their homes. >> susie: certainly a lot more work to be done. we appreciate you coming on the program to tell us about this first phase. thank you very much. >> thank you. >> susie: my guest tonight, martha coakley, massachusetts attorney general. >> tom: now that health care reform is law, financial regulatory reform tops the to do list on capitol hill. that's what congressional democrats chris dodd and barney frank said today after meeting with president obama. senator dodd and congressman frank crafted the financial overhaul, and say it will pass congress this spring. the legislation calls for a strong consumer protection agency, and an end to too big to fail institutions. speaking outside the white house, congressman frank warned those companies their time is running out. >> there are going to be death panels enacted by the congress this year.
they're death panels for large financial institutions that can't make it. we're going to put them to death, and we're not going to do very much for their heirs. >> tom: the senate plans to debate and vote on the financial reform legislation in mid-april. both democrats and republicans say they're hopeful the bill will receive bipartisan support. >> susie: here are the stories in tonight's "n.b.r. newswheel". selling in telecom shares and consumer staple stocks led wall street lower today. the dow fell 52 points, the nasdaq was off 16, and the s&p 500 lost six. big board volume was over a billion shares for the first time in a week. adding to the selling on wall street, fresh concerns about debt defaults in europe. fitch ratings cut today portugal's sovereign debt rating, and said more downgrades are possible. new home sales tumbled to record low levels last month despite generous tax credits for buyers. sales fell 2.2% in february. economists expected them to rise about 2%. >> tom: still ahead on the program, with 50 million
customers around the globe, it took a quack to make this insurance company a household name. we meet the company behind the duck-- aflac! >> susie: many investors have been on the sidelines watching the stock market skyrocket from last year's march lows. the s&p 500 is up a stunning 70% from a year ago. but, with the stock market now at 18-month highs, many people think they missed out on the rally and it's just too late to get in. so, erika miller asked the pros what to do. >> reporter: we all know the feeling of missing the bus. for many people, it's the same feeling as missing out on the big market gains the past year. but the good news is many professional advisors do not think the stock market's ride is over. david katz has a value approach, meaning it's his job to find undervalued stocks. >> the difference between today and a year ago is that last year there were 400 or 500 companies that we thought were table
pounding buys and selling at once in a 20-year low. today, you have to be a lot more discerning. having said that, there still are a lot of very good opportunities in some good businesses. >> reporter: three of the names he likes are devon energy, conoco phillips, and dell. but the stock market has gone up practically in a straight line the past year. so many strategists believe a 10-15% market pullback is coming. possibly worse, if the economic recovery stumbles. benny lorenzo, chairman of investment bank and research firm kaufman brothers, knows the risks, but still thinks now is a good time to get in. >> the path of least resistance is up. so far. there's a lot of skepticism, which is good from a contrarian perspective. most people still... a lot of people still don't believe it that we can continue to go up. as long as the u.s. economic recovery continues, we believe the market will go up. >> reporter: three names he likes are all in technology:
apple computer, intel, and asia information, a company that helps firms establish a presence in china. all three, he says, have strong growth prospects. if you are ready to start investing in stocks, but are a little bit nervous, you may want to consider dollar cost averaging. as financial planner cary carbonaro explains, that means putting in small amounts regularly. >> dollar cost averaging is always a good solution over time. because if they have a long time horizon, if they want to put it in now, they're going to put in equal amounts over time. they can't market time any way, and it's an effective strategy to get in. >> reporter: the good thing about busses is there's always another one coming. similarly, it's never too late to start investing. the key in both situations is making sure you are on the right route. erika miller, "nightly business report", new york.
to erase a portion of principle from certain underwater mortgages. that news got mortgage insurance stocks moving. the p.m.i. group has rallied almost 50% in the past two sessions, first catching a bid after it got the green light from freddie mac to insure mortgages, then today's b. of a. news. radian group hit a new high on the rally. m.b.i.a and m.g.i.c. are at their highest price since last fall. staying with real estate for a moment, some builders saw some action after lennar reported earnings. lennar's loss was not as bad predicted thanks to orders and margins jumping. orders were up 18%. that optimism led to some builder buying; lennar stock is at a new post-recession high. hovnanian and brookfield also got into the act. also running after some new highs were a couple of restaurants. the latest spark today came from the company behind red lobster and olive garden, darden restaurants. on an earnings call, darden said consumer demand is on the mend and industry sales should continue to improve, but with some choppiness. darden raised its earnings forecast after beating the street.
steak house ruth's chris also hit a new high. while we're looking at menus, a new item for starbucks shareholders: a dividend. starbucks will pay its shareholders a quarterly dividend of a dime per share beginning in a month. the stock is just off two and a half year highs. sprint is consistently among the most actively traded stocks on the new york stock exchange. it did almost 150 million shares today, rallying close to $4 a share for the first time since mid-january. the company unveiled the first u.s. phone designed to use the super high speed 4g wireless network. it will be for sale this summer. that put pressure on at&t and verizon. biotech firm genzyme continues to have some problems with a plant in massachusetts, problems that may lead the food and drug administration to take action. genzyme is at a six-week low tonight. while production will continue at the allston, massachusetts plant, the company expects the f.d.a. to have someone else oversee manufacturing there,
which would lead to higher operating costs. smart energy has a big buzz phrase for public utilities, things like advanced energy meters. esco technologies makes smart meters. it had been considered the front runner for a $900 million supply deal to southern california gas. but that was thrown into question today and the stock lost 12% on more than 15 times average volume. we saw a volume spike in an exchange traded funds that follow some u.s. bond prices. ticker symbol t.l.t. follows prices of government bonds that run at least 20 years. it saw almost three times normal volume today, dropping by almost 2% as market interest rates rose. traders tell me worries about congress putting the pressure on china over trade as well as a poorly received auction of some government debt led to the selling. watch schlumberger tomorrow. after the close it announced a $1 billion buyout of a private
french firm. and that's tonight's "market focus". >> tom: with the interest rate on savings and money mark accounts near historic lows, many people have been looking for higher returns or yields, some are taking their cue from uncle sam whm the government bailed out banks and auto makers it bought prefered stock, which share the features of a common stock along with a bond. usually they bring with them higher dividends. we continue our searching for yield series tonight with our street critique guest, ken winans, president of winans
international. joining us from san francisco. welcome to the program. >> thank you, tom, pleasure to be here. >> tom: how does a prefered stock differ from an ordinary common share? >> main difference is the level of the dividend. they're just dramatically higher in the prefered shares than they are in the common stock sisters. >> tom: so does an investor approach a prefered investment like a stock or more like a bond given the higher dividend? >> you're probably going to get different answers from different people. at winans international we treat them bike a bond substitute so, they go through our analysis the same way we would a corporate issue. >> tom: so if it's a sub stout for a bond, what makes you prefer the prefered stock versus an ordinary bond? >> a couple of things. it might be that there are no issuers for the one we're interested in. secondly we found that it outperforms bonds if you're looking at the 10 to 20 year time frame. and they might just be priced
better. and you're better off with a prefered in those situations. >> tom: you brought a trio of prefered stocks that you like. begin with public storage, prefered shares v as in victor, a yield there nice 7.5%. a nice rally with the market over the past year. >> absolutely. it's been a stellar performer. a lot of people are trying to figure out how to play the real steet situation, especially with the news today that real steet mate be in a very glacial pace of improvement. and the prefered are a great way to play this. a wonderful read the weathered the financial hurricane of 2008 beautifully and seems to continue doing well. >> tom: this one yielding 7.25%, again a similar rally, although you've seen a little of the bloom coming off here lately, moving from 26.5 down to 25.5 per share. >> that's correct. there was a scare recently about whether or not repsol would be able to main taken a
relatively good yield. the dividends are secure and if the company ever cuts those dividend they're owed to the prefered shareholder before the common shareholders get any dividends. so this is a great international play for those that want the income. >> tom: final peek at real estate with hospitality properties trust, series b, yielding this one 8.75%. 25 and change for this prefered. what fuels this one higher? >> it's another read, but this is in the hotel motel vacation segment of the read area. it's making money, they seem to be fine and their finances, what is a little more aggressive, but again another company that weathered the 2008 storm beautifully and basically paying their investors to wait for a recovery in real estate. >> tom: do you own any of the trio that we mentioned tonight? >> tom, we own them all and a like to think that's why our portfolio is doing well this
year. >> tom: fair enough. thanks for wading through prefereds with us from san francisco tonight, ken winans. >> susie: here's what we're watching for tomorrow. quarterly results from accenture, best buy, conagra foods, and oracle. federal reserve chairman ben bernanke is on capitol hill to testify about unwinding the fed's stimulus programs. also tomorrow, tax guru kevin mccormally is back with his tax tips. he'll have three ways you can boost the amount of your standard deduction. a big shakeup at j.m. smucker. it's cutting about 700 jobs over the next three years, or 15% of its workforce. the jelly and jam maker is also closing four plants and building a new one. when the changes are done, the company will save about $60 million a year. smucker, which also sells food under the folgers, dunkin' donuts, and jif brands, will take about $200 million in restructuring charges over the five years. >> tom: 2009 was a really bad year for u.s. newspapers.
a report today by the newspaper association of america shows the recession sent advertising revenue down 27%, or more than $10 billion from 2008 levels. that was previously the industry's worst year since the great depression. classified ad sales fell 38% last year as more consumers used free websites like craigslist to buy and sell goods. since 2000, classified revenue is down by more than two-thirds.
>> susie: aflac. it's difficult to hear the company's name without thinking of its famous duck. that's exactly what the company wanted when it changed its name from american life assurance company. as scott gurvey reports, what started as aflac's novel corporate identity campaign is now one of the best known brands in history. >> reporter: this is a story about a duck. and a man. and the company they keep, or perhaps, keeps them. branding expert vasken kalayjian says it has been one of the most successful branding campaigns of all time. >> before the duck, people did
not remember what aflac... couldn't say the name aflac because it's not a very good name, frankly. it's an abbreviation, i think it's an acronym of american family something something. so people had a hard time with the name. so the agency ten years, i think, came up with the idea of the duck saying aflac and it was great, and it caught on. >> reporter: the man in our story is aflac c.e.o. dan amos, son of one of three brothers who founded what was the american family life insurance company in 1955. amos remembers the duck was not an easy sell. >> i can remember when we were debating whether to do the aflac duck commercial or not, people were... i tried to say, well there's this duck, and he quacks aflac, and you know, it's funny, and they didn't understand. >> reporter: but the public did, and aflac's name recognition is up from 10% to 92% in the decade since the duck's debut. revenue in 2008 was more than $16.5 billion and the company insures more than 50 million people worldwide. aflac does about 75% of its business in japan, where it
sells a wide range of insurance products, and the duck is an even bigger star there than in the united states. in the u.s. aflac primarily sells supplemental insurance, which makes cash payments when a worker is disabled and cannot work. analyst john nadel says in spite of the weak economy, aflac is coming off a good year. >> as we look forward, we expect more of the same. it's a very defensible business model. they are, you know, a leader by a long way in japan especially. in the u.s. there's a little bit more competition, but we'd expect certainly with macro conditions in the u.s. seemingly improving a bit, that 2010 and beyond should look a little bit better. >> reporter: you can follow the aflac duck on twitter. he also has a facebook page. and the company is now running a new campaign called, "you don't know quack." we'll talk about that tomorrow with c.e.o. dan amos. scott gurvey, "nightly business report", new york.
>> tom: in the "money file" tonight-- hey buddy can you spare a dime? julie stav has a new take on lending. she's senior financial expert at univision. >> with low savings rates and high consumer debt interest, it should come as no surprise that thousands of lenders are helping fellow americans get unsecured, personal loans at fair rates on websites that serve as matchmakers between lenders and borrowers. it is called peer-to-peer or social lending. peer-to-peer lending comes in two basic flavors, a loan with a fixed rate or a rate that is the result of a bidding process, very much like ebay, where investors bid for your loan. the amounts can range from $1,000 to $25,000 and among other requirements, you must be at least 18 years old, have a social security number, and an account at a financial institution. the application process is simple and your loan could be
funded in as little as two weeks. and, if you would like to help out by lending money to other people who need it, you may be able to receive a higher interest than you get in the bank. just use your search engine to begin your research. there are suitability requirements and risks involved in this investment, but you may begin with as little as $25. these companies are registered with the s.e.c. and must offer you a prospectus, so read it carefully before sending any money. matchmaker, matchmaker, the power of free enterprise and the internet community. i'm julie stav. >> tom: that's "nightly business report" for wednesday, march 24. i'm tom hudson. goodnight everyone, and goodnight to you too, susie. >> susie: goodnight, tom. i'm susie gharib. goodnight everyone, we hope to see all of you again tomorrow night. "nightly business report" is made possible by: